SAP Scales Back Business ByDesign Development Efforts

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SAP will limit the scope of its Business ByDesign cloud application suite going forward, focusing its development efforts on a new cloud application platform based on the vendor's HANA in-memory database.

While development of new Business ByDesign capabilities for specific industries will be halted, an SAP executive said there are no plans to discontinue the product.

"Within the existing scope of Business ByDesign we will add new functionalities. And we have a relatively long list," said Rainer Zinow, senior vice president of SAP's cloud business unit, in an interview. "What we will not do is build out new industry-specific capabilities."

The change in strategy doesn't come as a surprise to Michael Pearson, president of Contax, a Toronto-based solution provider and SAP partner. "I think Business ByDesign has struggled to gain a foothold in the market," he said.

While Contax is authorized to sell Business ByDesign, it's never done so, focusing instead on selling SAP's Business All-in-One application suite for midsize companies for either on-premise deployments or on a hosted basis.

SAP apparently has been slow to inform partners about the change. One SAP partner, who asked not to be identified, said he only has some unofficial information about the change from contacts inside SAP and has not received any official word from the company.

Zinow said the decision came as the company was in its "quiet period" prior to the company's Oct. 21 third-quarter earnings announcement. And he admitted that some partners "haven't been happy with the timing."

Business ByDesign, SAP's first cloud application suite, has had an up-and-down history since its initial launch in September 2007. Targeted at midsize businesses, sales of the cloud applications were slow to take off and the product was relaunched in 2010 with a multitenant architecture.

Last year SAP acquired cloud software vendors SuccessFactors and Ariba and began introducing individual cloud applications, such as Sales On Demand and CRM On Demand. And the company's Business One suite for small businesses is now available as both cloud and partner-hosted applications.

Earlier this week, SAP reported "triple-digit, year-over-year growth" in revenue from cloud software subscriptions and support in its third quarter ended Sept. 30. The company said revenue from cloud services now has an annual run-rate exceeding 1 billion Euros.

Zinow acknowledged that line-of-business applications like the Sales On Demand and CRM On Demand have taken off faster than cloud application suites. "But SAP believes that, in the long run, the suite approach will always win," he said.

NEXT: Reorganization Of SAP Research And Development Operation Leads To Business ByDesign Decision